A Company’s standard labor cost per unit of output is $23.94 (2.10 hours x $11.4

Question

A Company’s standard labor cost per unit of output is $23.94 (2.10 hours x $11.40 per hour). During August, the company incurs 2,634 hours of direct labor at an hourly cost of $11.00 per hour in making 1,300 units of finished product.

Compute the total, price, and quantity labor variances. (Round answers to 2 decimal places, e.g. 52.75.)

Total labor variance

$

FavorableUnfavorableNeither favorable nor unfavorable Labor price variance

$

UnfavorableNeither favorable nor unfavorableFavorable Labor quantity variance

$

FavorableNeither favorable nor unfavorableUnfavorable

Explanation / Answer

Answer:

Total variance = Stanard cost - Actual Cost = (1,300 units*$23.94) - 2,634 hours *$11 = $2,148 (Favorable)

Labor price variance = Actual Hours(Standard rate - Actual rate) =

2,634 hours ($11.40 - 11) = $1,053.6 (Favorable)

Labor Qty variance = Standard price (Standard hrs - Actual hrs) =

$11.4 (1,300*2.1 - 2,634) = $1,094.4 (Favorable)

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